Tax disputes are disagreements between taxpayers and tax authorities such as the IRS. Although they can feel impossible to resolve, there are successful ways to do so. Taking quick, effective action can help you to understand the dispute and your legal standing, and find ways to deal with it.
Hiring a tax lawyer can help you handle a tax dispute with ease, because they know all about the tax regulations, laws, and best resolution methods for your specific case.
ContractsCounsel, an online legal network, connects you with professional lawyers with several years of experience in helping clients navigate tax disputes.
Read on to learn about the most common types of tax disputes, how you can deal with them, and when to call a lawyer.
What are the Most Common Tax Disputes?
Tax disputes can occur throughout the tax process, such as when filing a tax return or receiving a notice. Some of the most common tax disputes include the following:
- Underclaimed taxes. If your declared income doesn’t match what the IRS has on file, they will send you a notice.
- Classification. If an employee is classified incorrectly as a certain type of taxpayer, this causes discrepancies and queries.
- Tax audits. Being audited might result in a taxpayer wanting to challenge the tax authority’s decision.
- Deductions. Taxpayers might try to claim deductions for certain things, such as home office expenses, that are not being considered.
What Steps Should You Take When Faced with a Tax Dispute?
While dealing with a tax dispute is stressful, there are ways to handle it in a professional, effective way.
Review Your Tax Documents
Before doing anything, check your tax documents and records. This includes payment receipts and returns.
You’ll clarify your legal position while spotting any discrepancies. For example, if you’re being audited, having a record of your income statements and returns will help you see if anything is incorrect.
Contact the Tax Authority
Whether you’re dealing with the IRS or another tax authority, call them to discuss the issue. This is especially of importance if you’ve received a notice and want to query it.
Speaking to your tax authority will clarify the problem on their side and show them that you wish to resolve the situation promptly.
Consider an Appeal
If you’re still unsatisfied with the situation, such as if you don’t agree with the resolution, you can file an appeal with the IRS. To do this, you’ll have to present your case in front of an independent reviewer so that the tax dispute can be resolved.
Avoid trying to gather evidence and present your case yourself. You should hire a tax lawyer from ContractsCounsel to help you. They have the tax knowledge and legal expertise you need to appeal your case and follow the processes correctly.
Hire a Mediator or Arbitrator
Alternative dispute resolution (ADR) methods can help you to come to an agreement with your tax authority. These methods include mediation and arbitration.
Mediation
This process involves a neutral third party listening to your case and encouraging you to express your concerns. Instead of delivering an outcome or decision, the mediator lets you and the tax authority come to a compromise or agreement together.
Arbitration
Arbitration is a more formal process that involves hiring a third-party arbitrator to oversee the evidence and your respective cases. They will deliver a final binding decision that both parties need to follow.
The benefit of mediation and arbitration is that they strive to keep the dispute out of court. That said, there could be times when you might wish to take legal action against the tax authority. Litigation is a lengthy and expensive process, so it should only be considered if all other attempts at resolution have failed.
Do You Need a Lawyer for a Tax Dispute?
Hiring a tax lawyer is recommended for tax disputes. Even if your situation is simple and you’ve decided to contact the tax authority for clarification, a tax lawyer can help you to understand your legal position and the best outcomes for your specific situation.
A lawyer can help you in several ways throughout the dispute-resolution process:
- They’ll gather all the evidence you need to support your case.
- They’ll represent you in court, should this be required.
- They can work as your mediator or arbitrator during ADR methods.
- They’ll use their negotiation skills to deal with the tax authority on your behalf.
- They’ll know the best ways to respond to notices or other documents the tax authority might send you.
- They’ll provide an in-depth understanding of all the tax rules and laws that apply to your situation.
How Can You Prevent a Tax Dispute?
No one wants to have to deal with the IRS or state tax authority. There are ways to try to prevent a dispute from occurring.
Maintain Good Tax Records
By having organized tax documents and returns, you’ll be able to refer back to them should the tax authority have a query. This might be enough to prevent a dispute.
When you have all your records handy, you’ll avoid making unnecessary errors when filing your taxes, which will keep you in the clear with the IRS.
Meet all the Tax Deadlines
If you don’t submit your taxes when they are due, this could lead to penalties and even disputes. Keep reminders on your computer or phone to notify you of when a tax deadline is approaching so you can file your returns ahead of time.
Be Honest
It’s wise to be upfront with tax authorities so that you don’t get called out for fraud or misrepresentation, both of which can have serious legal penalties and other consequences.
Do you want to hire a lawyer for a tax dispute?
Connect with a vetted lawyer on ContractsCounsel’s platform. They’ll give you expert advice on how to navigate tax disputes, while strengthening and supporting your case.
Key Takeaways
- Tax disputes can arise from various issues, such as late submissions, penalties, and misrepresentation.
- Mediation and arbitration can help you to keep your dispute out of court.
- Hiring a tax lawyer will assist you to choose the best dispute-resolution method and protect your assets.
